Facebook Shares Retreat Below IPO Price 471
First time accepted submitter gtirloni writes "Just days after wrapping up the biggest initial public offering in Silicon Valley history, shares of Facebook slumped 6% and tumbled below their issue price on Monday, a troubling signal for the newly-public social network. Facebook broke below its $38-a-share issue IPO price in the wake of a highly-anticipated offering that raised more than $16 billion, the second-largest domestic IPO after Visa's 2008 debut. Shares of Facebook were recently off 6.44% to $35.72."
Not surprising (Score:5, Interesting)
At this point, Facebook has nowhere to go but down.
This is a good thing. (Score:4, Interesting)
Re:Troubling signal, why? (Score:3, Interesting)
Re:Troubling signal, why? (Score:5, Interesting)
>>If I were a shareholder before the IPO and the per share price would had doubled, that would mean half of my potential profit and ownership lost
I don't understand. If I was a Facebook employee (for example) and the shares the company gave me jumped from $38 to $76, wouldn't that be good for me?
Re:Troubling signal, why? (Score:5, Interesting)
I can't really understand why you're saying that share price going down on IPO is a troubling signal.
I know what everyone is saying about how the $38 share price was perfectly picked as the correct valuation of the company, but (and I am not a financial expert) what does this mean to the people who bought in on Friday? With no major share price movement they are left with a bunch of stock certificates and all their money in the hands of FB. How does this become a worthwhile investment for them? They can't expect to get money back through increased share price, so they are going to have to rely on a dividend for returns. Is there any expectation that there will be a decent dividend?
I'm more inclined to believe what a pundit wrote a couple of weeks ago (and I have to paraphrase here) that up until the IPO FB had already sucked out as much money as possible from the system and that there was really nowhere to go after the IPO.
Re:Troubling signal, why? (Score:4, Interesting)
Re:If it were trading at google's P/E (Score:5, Interesting)
I'm going to be betting on it the moment facebook option trading opens up and I can short the life out of it. I'd have loved to short at $40+ that it was trading at on Friday as I was pretty sure it's going to go down. Most IPO's underprice themselves slightly and there's euphoria in the just-after-IPO trading that usually sees a good 20-50% upside and a good downswing in the same day of the IPO. This never happened (it opened at $42, hit $45 in a few minutes and was $38-40 range bound the rest of the day meaning that the IPO was priced pretty much at the maximum that investors are willing to go at. Therefore any hope for upwards movement now comes from positive surprises and better than expected earnings. However considering the valuation at 100x trailing 12m earnings the valuation already assumes exponential earnings growth. Therefore as someone already put it ... only way is down. Once options come online I'm going to short at $30/$35 range for 6-9 months depending on the option price and I'm fairly certain I'm going to make a ton as I doubt FB can run 2-3 consecutive quarters with exponential earnings growth and once that doesn't happen the valuation will go through a heavy correction (likely to around 20-40x earnings) which is likely to mean a 40-60% downwards shift to around $20 territory. Might not happen with one earnings result or two, but I doubt they'll keep the euphoria for more than that. But for FB itself and the investors that cashed out with the IPO it was perfectly priced :P
Eye opener, one of: (Score:5, Interesting)
Enlightening article: http://atimes.com/atimes/Global_Economy/NE22Dj03.html [atimes.com]
A Facebook page is a pre-arranged display window whose purpose is to block our gaze from the real person behind it.
That is Facebook's curse.
It attracts hundreds of millions of users by providing them with a platform for narcissism and the means to lie about themselves more persuasively, but it hopes to make money by learning what it is that they really like, the better to show them advertisements.
'nuff said :)
Re:Troubling signal, why? (Score:5, Interesting)
The Suckerborg lives up to its name!
This is for suckers who want to roll boxcars, not the technical trader.
"We had some clients call and once we step them through the numbers, they sober up," he said. "The valuation is 100 times earnings in a stock market that is trading at 12." [reuters.com]
The price has been artificially inflated through buying by Morgan Stanley - one of the underwriters.
They have been trying to sustain this since Friday, but are running out of steam.
See Cryptogon on this:
"I did watch a realtime price ticker once they finally opened it. Wow. What a show.
It came out of the gate at around $42 and people just sold the living shit out of it. These were the whale clients at firms who had access to blocks of shares before it was trading, dumping into the crowd.
We knew the issue price was $38, so I watched very carefully as it got down there for the first time. As the price dropped to exactly $38, it held there, absorbing, I don't know, millions or tens of millions of shares.
'Squid on the bid,' I actually laughed out loud.
Day traders quickly figured out that someone with infinite ammo was defending $38, so the little guys decided to party like it was 1999, taking it long for a couple of bucks, shorting it back down, where the axe would open fire again and not stop until the herd learned that there was only one way to go from $38 on the first day, and it wasn't down.
If you have tick data for FB from Friday, it would be worth replaying that on your time/sales screen to watch what happened around that $38 level. Get yourself a big bucket o' popcorn ready because the 'unseen hand of the market' put on a good one for those who knew what they were looking at."
http://cryptogon.com/?p=29242 [cryptogon.com]
See the video replay of High-Frequency-Trading manipulation of the 38 USD. They call it a "Tractor Beam" Ha!
http://www.youtube.com/watch?v=KrkH_WQxxEA [youtube.com]
Re:Troubling signal, why? (Score:4, Interesting)
Only if you were vested. Otherwise the only price that will matter to you is the price the day you have the legal right to sell the stock.
Personally I love this. The ones taking it in the shorts are the underwriters and the insiders who thought they had a guaranteed payday by virtue of using connections to get in early. Turns out, in this case there were no bigger fools to pass it on to. Pump and dump didn't work for once.
Let me be the first to say 'Ha, Ha' to the 1%ers (this time). Nice job redistributing the wealth Mr. Zukerberg.
Re:Troubling signal, why? (Score:5, Interesting)
As a retail investor you'll never get a broker to sell to you on an IPO day. They have to pocket their own money, then sell to their own trusted clients. You might have a chance to buy shares when the people on Wall Street have sucked all the money out of the shares, like what happened to AOL and Yahoo.
Anyone got any numbers on how much the underwriters were moving around? They came in and took control within the first hour. Volume was massive especially in the last few hours when they forced it to flatline near $38.
Re:Troubling signal, why? (Score:4, Interesting)
Problem is, their numbers are already stagnanet where valuable users are - in the wealthy first world countries. They're not longer a fast growing company there.
They are growing in developing countries, but per user value there is miniscule in comparison, which also doesn't bode well for company value.
Re:Troubling signal, why? (Score:4, Interesting)
Re:Troubling signal, why? (Score:5, Interesting)
there's 6 billions more people out there
.... 4 billion of whom don't have internet access.
I would say that $18 per user is even little bit low for the value and revenue every user brings to Facebook, ads revenue, sales revenue (from in-game coins), and the social effect of having all the users in the service.
The company is valued at $104Billion which places a value of $115 per user, or £14.80 per person on the planet. Facebook already pockets 14% of all advertising money spent in the US [emarketer.com], and with companies such as GM pulling out from facebook [latimes.com], you seriously have to question how much more it can grow it's ad revenue.
And who knows what other monetization Facebook will bring to the table once they get to it.
The kind of aggressive/intrusive monetisation that makes it users leave in droves?
Zero (Score:5, Interesting)
While zero is the least money you could invest, I knew people back in the .com days whose investment was less then zero.
They would buy a lot of .com stock on margin (i.e. a stock loan), and the stock would fall faster then they could sell it - leaving them with no stock plus a loan (i.e. a negative investment)
Re:Troubling signal, why? (Score:4, Interesting)
My superannuation (Australian government-mandated retirement fund a bit like a 401k in the USA) consistently has _less_ money in it than I deposit, mostly due to fees charged by the [obscenely profitable] banks who run these funds and choose where to invest the money.*
Every Australian employer has to send 9% of each employee's wage to one of these funds. The employee can [usually] choose the fund, but they can't just choose to stick it in a term-deposit, or under the mattress.
Under the mattress currently shows a lower loss than allowing Macquarie Bank et al to gamble with this money.
Again, what seemed like a good idea (mandatory retirement savings for all working Australians) has turned into free money being handed to the banks to gamble with.
I repeat, not only does superannuation not keep up with inflation, it actually goes BACKWARDS. Stuffing the money in a mattress would be a far superior investment, but alas I'm not allowed to do that.
Fuck superannuation. Any Aussies have a better solution? How hard is it to set up so-called "self-managed super"?
*It's not their money, and the investor (me) can't claim it until I retire (like 40 years from now) so it's effectively a blank cheque for these arseholes to invest in any flavour-of-the-month IPO with absolutely no repercussions when they lose all (my) money.